Luxury Briefing: The luxury fashion rental market is gaining traction

That’s according to fashion resale company The RealReal’s 2024 Luxury Consignment Report, released on Tuesday. Among other supporting data, it showed that Gen Z searched TheRealReal.com for the six brands synonymous with “quiet luxury” 29% more this year than in 2022. Among them: Brunello Cucinelli, Loro Piana and The Row, each known for their logo-free styles beloved by the ultra-wealthy. 

But at the same time, the highest-end fashion brands are drastically increasing their prices. In 2022, Hermès announced plans to increase its prices by 5-10% this year. Meanwhile, Chanel implemented price increases of an average of 8% in March alone — some styles reportedly saw a 16% price hike. And more price increases are expected from the brand before the end of the year. 

As consumers’ budgets get squeezed by rising credit card delinquencies and the looming return of student loan payments, they’re pulling back on their discretionary goods spending. For many fashion fans, that’s meant finding new ways to indulge their love for “it” styles and runway-plucked OOTDs. 

Luckily for them, more luxury rental options are hitting the market, offering a more affordable means to a wardrobe of current designer looks. According to the entrepreneurs carving out the market, they’re rapidly expanding their businesses to meet demand. 

In September, Janet Mandell will open its third storefront, in Manhattan’s Flatiron neighborhood. The 5-year-old luxury rental company specializes in special occasion clothing and accessories by fashion’s premier brands, from Alaia and Alexander McQueen to Valentino and Versace. It also has stores in Chicago and Los Angeles.

“I want to have a presence from coast to coast,” said Janet Mandell’s namesake founder. She added that Florida and Texas are among the states she’s eying for store expansion. 

The company is on track to pull in $3 million in revenue this year, largely driven by physical retail sales, Mandell said. Despite the demand she’s seen for online rentals, she’s only recently begun to tackle the opportunity; the company’s e-commerce site, which features about 70% of the product assortment, will soon showcase a “revamp” that better aligns with its luxurious in-store experience, she said. 

According to Mandell, the company’s store associates spend an hour with each customer, acting as a stylist. She called that service, and the fact that the company offers head-to-toe styles, a differentiator in the increasingly crowded luxury resale market. 

For its part, the growth of 7-year-old luxury rental service Switch has “exploded” since December, said founder and president Liana Kadisha Cohn. She owed that to the launch of a higher-end membership, dubbed Switch Select, which provides access to an accessory with an average retail value of $4,000 for $195 per month.

Also in December, the company adopted a more “concierge-like approach” to customer service, including assisting customers by text, phone and email. And, notably, it expanded its product offerings beyond jewelry to include handbags. 

“The addition of handbags has transformed our business,” Kadisha Cohn said. Out of the gate, customer demand exceeded expectations, forcing the company to implement a waitlist for its membership. And keeping up with demand has continued to be a challenge, particularly due to the high upfront costs of the products. Switch, which operates independently of brands, carries styles by Chanel, Louis Vuitton and Hermès.

“I don’t see a day where you’ll see Chanel [-operated] rental,” said Kahan Dvorett. “Chanel is about exclusivity, and rental is about access.” 

On that note, Mandell noted that her company prioritizes investments in inventory over marketing — doing the opposite is where competitors including Armarium, which closed in 2020, have gone wrong, she said. Janet Mandell offers around 200 total brands; along with couture-level designer pieces, it rents limited-edition styles by contemporary brands including Bronx and Banco and Patbo.

“If you build awareness and get customers to come in, then you don’t have the inventory, your business is done,” Mandell said. 

The relationships Mandell built with brands and vintage dealers as a paying customer before starting the business have proven beneficial, she said, noting that they often permit “first dibs” on sales and new styles. While she purchases couture pieces at retail, she works like a buyer with younger brands including Magda Butrym and David Koma; she attends their fashion shows, and they give her wholesale rates.

Another newer, yet unlikely, entry into the rental market is Modern Luxury, the media brand that owns localized lifestyle publications including Ocean Dive and Los Angeles Confidential. In October, it soft-launched ModLux.Rent, an online rental platform featuring styles by contemporary and advanced contemporary brands including Vince, Cynthia Rowley and Derek Lam 10 Crosby. The service is largely run by rental-focused software provider Caastle, which owns part of the business and populates the assortment with its brand clients. 

“Customers that engage with a brand through rental also spend more with the brand on e-commerce,” said Jessica Kahan Dvorett, global head of growth at Caastle. “And multi-brand rental services are a great place for brands to get exposed to new, younger, digital-savvy customers.” She added that offering rental provides brands with a diversified revenue stream, helping to safeguard them as customers’ tastes and behaviors change. 

For its part, Modern Luxury serves as the marketing engine behind ModLux.Rent, promoting the rental subscription service to its readership of 16 million. ModLux.Rent members get access to five styles at a time for a monthly fee of $125. 

So far, the company has seen “real momentum,” Kahan Dvorett said. It will soon onboard brands including Zac Posen, Hervé Léger and Joie. And, come spring 2014, it will aim to accelerate customer acquisition and growth with increased investment. 

To ensure that the rental service lives up to its ”Lux” name, ModLux.Rent prioritizes quality in its clothing offerings, its packaging and its customer service, Kahan Dvorett said. She added, “The consumer who is wearing luxury accessories is often wearing contemporary and advanced contemporary brands.”

Meanwhile, OG rental service Rent the Runway has continued to prioritize a “premium” selection of inventory, based on customer feedback: In a recent customer survey by the company, 85% of respondents said they value high-end luxury fashion, and 87% said they use RTR to access brands they can’t otherwise afford. 

Rent the Runway also shared that, along with its high-end brands and quality service, it prioritizes messaging the value that its service provides: On average, its subscription service provides 20x the gross merchandise value of a customer’s spend. A popular membership tier gives renters 10 styles per month for $144. The more than 700 designers offered by Rent the Runway include New York Fashion Week staples Altuzarra, Proenza Schouler and Ulla Johnson. 

For its marketing, Janet Mandell has relied heavily on word-of-mouth, including through fashion stylists who are paying customers; the celebrity clients they’ve styled in Janet Mandell-rented pieces have included Kylie Jenner, Megan Fox and Kourtney Kardashian. Mandell has invested in only one influencer campaign, timed with the company’s launch. And she plans to run a “small campaign” around New York Fashion Week next month, she said. 

Mandell said the business, which she and her husband have bootstrapped, is profitable. To expedite its growth, she’s now seeking investors. 

Of course, allowing customers to borrow high-cost items comes with its challenges. Rather than damages and dry-cleaning, Mandell alluded to the fact that the biggest issue has been theft. The company now conducts background checks on renters of one-of-a-kind pieces, as those can’t be replaced, Mandell said. 

It’s worth noting that multiple rental platforms for luxury watches have come and gone in recent years. In 2018, Eleven James shuttered after five years in business. Meanwhile, the online site for BreitlingSelect, launched in 2021, now features a form for interested shoppers to fill out to be notified when the rental service returns. Breitling did not respond to a request for comment.

Mandell said that the SAG strike has also impacted her company’s growth; 60% of revenue is driven through the Los Angeles store, which has been so slow that associates’ hours have been cut. Other markets are making up for the losses, she said.

But, all in all, the sources for this story said they’re strategizing to build on their luxury rental business’s current growth trajectory, which spells good hope for the market. For example, Kadisha Cohn said Switch will “double down” on handbags in the coming year and will potentially expand to more accessories categories in the future.

“Luxury has traditionally been hyper-exclusive, rare and constricting,” she said. But rental instead makes it feel “inclusive, abundant and liberating.”